New Highs on Hopes that New President Brings New Stimulus

The major indices all reached record highs on Wednesday as a new President gets inaugurated and Netflix soars double digits.

As far as the market is concerned, it might as well have been a big dollar sign taking the oath this afternoon. President Biden already outlined a $1.9 trillion stimulus package, but he's probably not done. More relief is expected in the near future, as evidenced by Treasury Secretary nominee Janet Yellen’s “go big” comments yesterday in front of a Senate committee.

The NASDAQ once again was easily out in front with a surge of 1.97% (or approximately 260 points) to 13,457.25.

The index got a lot of help from Netflix (NFLX), which soared just about 16.9% in the session after its quarterly report. The streaming giant’s top and bottom line results didn’t really impress investors, but the growth in global subscriptions sure did.

NFLX added 8.5 million new customers, which soared past expectations of less than 7 million. It now has more than 200 million subscribers The company is also thinking about stock buybacks.

Meanwhile, the S&P rose 1.39% on Wednesday to 3851.85, while the Dow advanced 0.83% (or about 258 points) to 31,188.38.

This is the first time all three major indices reached new highs at the same time since Friday, January 8.

Morgan Stanley (MS) continued its industry’s pattern this earnings season by reporting better-than-expected fourth quarter earnings and revenue… but getting little love from the market. However, the stock only dipped by 0.2%.

It’s still early in the season, but we’ve had a pretty strong start with a very high proportion of companies beating estimates and even offering favorable outlooks. For an in-depth study of the season so far, make sure to read Sheraz Mian’s recent Earnings Trends report titled: “Early Q4 Results Show an Improving Earnings Picture”.

In addition to the next round  of reports and any first moves by the new Administration, investors will also be watching the jobless claims report tomorrow.

You certainly remember that last week’s was particularly rough with approximately 965,000 people filing claims, which blew the doors off expectations of 800K.

Unfortunately, tomorrow’s number isn’t expected to be much better, though it might not matter to the market since investors are looking forward right now.

Today's Portfolio Highlights:

Blockchain Innovators: News of a 2-for-1 stock split sent eXp World Holdings (EXPI) surging nearly 16% on Wednesday. Dave added this cloud-based real estate business back in March during the early days of the economic shutdown. The stock has now soared nearly 1000% since being added. Yeah, you read that right. In less than a year, EXPI has turned into a 1000% winner for the portfolio!  The editor certainly thought a company like this would perform well during the pandemic, but this is ridiculous… in a great and very profitable way. Needless to say, the rally in EXPI today gave this portfolio one of the top performers among all ZU names. 

Home Run Investor: With a full portfolio, Brian must cut a name in order to add a new one. Therefore, he sold Altra Industrial Motion (AIMC) on Wednesday for a nice return of 22.2%. in approximately two-and-a-half months. The new addition is Verra Mobility Corp. (VRRM), a Zacks Rank #2 (Buy) from the security and safety services sector. The company has beaten the Zacks Consensus Estimate in each of the last four quarters with an average surprise of 49%. The pandemic impacted VRRM’s topline in 2020, but analysts are calling for growth of 33% in 2021. The complete commentary has more specifics on today’s addition.   

Surprise Trader: Data protection has become increasingly more important in this “stay home” economy. Therefore, Dave added CommVault Systems (CVLT) on Wednesday with a 12.5% allocation. The company beat the Zacks Consensus Estimate by 28.6% last time and as much as 168.4% the quarter before. CVLT will look to make it three in a row before the bell on Wednesday, January 27. It has a positive Earnings ESP of 4.71% for the report, so there's a good chance it can keep the momentum going. Unfortunately, that’s not the case for Goldman Sachs (GS), which is “stuck in the mud” despite what Dave considered to be a “great report”. He sold GS for a loss of about 3.7%. Read the complete commentary for more on today’s action. 

Counterstrike: As previously mentioned, shares of eXp World Holdings (EXPI) soared on Wednesday after this cloud-based real estate broker service announced a 2-for-1 stock split. Jeremy reminds us that such a split does not make a stock more valuable, but the market loves them nonetheless. The editor considers the upmove to be “silly”, but the profits are not. The portfolio sold EXPI today for a nice return of 28.6% in less than two weeks. You’ve got to take what the market gives you!

TAZR Trader: Leave it to Kevin to find some rare value in the tech space. Of course, he had to go “across the pond” to find it. On Wednesday, the editor added Talend (TLND), a provider of big data and cloud integration solutions. He’s most impressed with the company’s cloud revenue, which has been doubling (yoy) for 14 straight quarters and will breach $100 million for 2020. Furthermore, it’s 4X price/sales multiple is a bargain compared to peers like Splunk (SPLK, 10X), Alteryx (AYX, 15X), Elastic (ESTC, 20X) and MongoDB (MDB, 30X). The portfolio added TLND with a 7% allocation. Read the full write-up for more.

Have a Great Evening,
Jim Giaquinto

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